Recession, not taxes, reduced the number of Maryland millionaires

August 27, 2011

Brian Murphy accuses Warren Buffet of using "misleading math" in his argument that the rich should pay more in taxes ("Warren Buffet is wrong," August 25"). Yet, it is Mr. Murphy who is misleading regarding Maryland's millionaire's tax.

Mr. Murphy argues this 2008 tax not only failed to generate the revenue it was projected to raise but also led to a decrease in millionaires in Maryland. Besides not acknowledging that correlation is not causation, Mr. Murphy leaves out key evidence in the apparent hope that readers will assume that higher taxes drive wealthier people out of Maryland.

Unfortunately for Mr. Murphy, there is ample scholarly evidence that increased taxes do not lead to out-migration, just as lower taxes do not lead to in-migration. While tax increases may lead some affluent households to leave, the vast majority choose to stay, and their states consequently gain significant revenues that help support vital public services.

Mr. Murphy should review the Center for Budget and Policy Priorities website for details on the various studies debunking the myth he is perpetuating. There are also several studies showing what actually does cause people to move from one state to another — factors such as crime, the environment and housing costs.

The Institute on Taxation and Economic Policy specifically found that Maryland's millionaire's tax did not lead affluent taxpayers to flee the state. A review of actual tax return data found that the number of millionaires filing Maryland taxes decreased because all incomes fell due to the recession, not because millionaires had fled the state.

In other words, many tax filers with incomes over $1 million in 2007 remained in Maryland and filed taxes in 2008, but no longer had net taxable income over a million dollars. They didn't flee — they just had less income. This wasn't due to the tax changes but to income lost because of the recession.

As clearly stated by Jon Shure of the Center for Budget and Policy Priorities, "millionaires didn't move out, they moved down." As much as Mr. Murphy and the Republicans would like us to believe the myths they are perpetuating, readers of The Baltimore Sun deserve facts, not legends.